The Psychology of Inequality

In 2016, the highest-paid employee of the State of California was Jim Mora, the head coach of U.C.L.A.’s football team. (He has since been fired.) That year, Mora pulled in $3.58 million. Coming in second, with a salary of $2.93 million, was Cuonzo Martin, at the time the head coach of the men’s basketball team at the University of California, Berkeley. Victor Khalil, the chief dentist at the Department of State Hospitals, made six hundred and eighty-six thousand dollars; Anne Neville, the director of the California Research Bureau, earned a hundred and thirty-five thousand dollars; and John Smith, a seasonal clerk at the Franchise Tax Board, earned twelve thousand nine hundred dollars.

I learned all this from a database maintained by the Sacramento Bee. The database, which is open to the public, is searchable by name and by department, and contains precise salary information for the more than three hundred thousand people who work for California. Today, most state employees probably know about the database. But that wasn’t the case when it was first created, in 2008. This made possible an experiment.
The experiment, conducted by four economists, was designed to test rival theories of inequity. According to one theory, the so-called rational-updating model, people assess their salaries in terms of opportunities. If they discover that they are being paid less than their co-workers, they will “update” their projections about future earnings and conclude that their prospects of a raise are good. Conversely, people who learn that they earn more than their co-workers will be discouraged by that news. They’ll update their expectations in the opposite direction.

According to a rival theory, people respond to inequity not rationally but emotionally. If they discover that they’re being paid less than their colleagues, they won’t see this as a signal to expect a raise but as evidence that they are underappreciated. (The researchers refer to this as the “relative income” model.) By this theory, people who learn that their salaries are at the low end will be pissed. Those who discover that they’re at the high end will be gratified.
The economists conducting the study sent an e-mail to thousands of employees at three University of California schools—Santa Cruz, San Diego, and Los Angeles—alerting them to the existence of the Bee’s database. This nudge produced a spike in visits to the Web site as workers, in effect, peeked at one another’s paychecks.
A few days later, the researchers sent a follow-up e-mail, this one with questions. “How satisfied are you with your job?” it asked. “How satisfied are you with your wage/salary on this job?” They also sent the survey to workers who hadn’t been nudged toward the database. Then they compared the results. What they found didn’t conform to either theory, exactly.
As the relative-income model predicted, those who’d learned that they were earning less than their peers were ticked off. Compared with the control group, they reported being less satisfied with their jobs and more interested in finding new ones. But the relative-income model broke down when it came to those at the top. Workers who discovered that they were doing better than their colleagues evinced no pleasure. They were merely indifferent. As the economists put it in a paper that they eventually wrote about the study, access to the database had a “negative effect on workers paid below the median for their unit and occupation” but “no effect on workers paid above median.”

The message the economists took from their research was that employers “have a strong incentive” to keep salaries secret. Assuming that California workers are representative of the broader population, the experiment also suggests a larger, more disturbing conclusion. In a society where economic gains are concentrated at the top—a society, in other words, like our own—there are no real winners and a multitude of losers.

Keith Payne, a psychologist, remembers the exact moment when he learned he was poor. He was in fourth grade, standing in line in the cafeteria of his elementary school, in western Kentucky. Payne didn’t pay for meals—his family’s income was low enough that he qualified for free school lunch—and normally the cashier just waved him through. But on this particular day there was someone new at the register, and she asked Payne for a dollar twenty-five, which he didn’t have. He was mortified. Suddenly, he realized that he was different from the other kids, who were walking around with cash in their pockets.
“That moment changed everything for me,” Payne writes, in “The Broken Ladder: How Inequality Affects the Way We Think, Live, and Die.” Although in strictly economic terms nothing had happened—Payne’s family had just as much (or as little) money as it had the day before—that afternoon in the cafeteria he became aware of which rung on the ladder he occupied. He grew embarrassed about his clothes, his way of talking, even his hair, which was cut at home with a bowl. “Always a shy kid, I became almost completely silent at school,” he recalls.
Payne is now a professor at the University of North Carolina, Chapel Hill. He has come to believe that what’s really damaging about being poor, at least in a country like the United States—where, as he notes, even most people living below the poverty line possess TVs, microwaves, and cell phones—is the subjective experience of feeling poor. This feeling is not limited to those in the bottom quintile; in a world where people measure themselves against their neighbors, it’s possible to earn good money and still feel deprived. “Unlike the rigid columns of numbers that make up a bank ledger, status is always a moving target, because it is defined by ongoing comparisons to others,” Payne writes.

Feeling poor, meanwhile, has consequences that go well beyond feeling. People who see themselves as poor make different decisions, and, generally, worse ones. Consider gambling. Spending two bucks on a Powerball ticket, which has roughly a one-in-three-hundred-million chance of paying out, is never a good bet. It’s especially ill-advised for those struggling to make ends meet. Yet low-income Americans buy a disproportionate share of lottery tickets, so much so that the whole enterprise is sometimes referred to as a “tax on the poor.”

One explanation for this is that poor people engage in riskier behavior, which is why they are poor in the first place. By Payne’s account, this way of thinking gets things backward. He cites a study on gambling performed by Canadian psychologists. After asking participants a series of probing questions about their finances, the researchers asked them to rank themselves along something called the Normative Discretionary Income Index. In fact, the scale was fictitious and the scores were manipulated. It didn’t matter what their finances actually looked like: some of the participants were led to believe that they had more discretionary income than their peers and some were led to believe the opposite. Finally, participants were given twenty dollars and the choice to either pocket it or gamble it on a computer card game. Those who believed they ranked low on the scale were much more likely to risk the money on the card game. Or, as Payne puts it, “feeling poor made people more willing to roll the dice.”

In another study, this one conducted by Payne and some colleagues, participants were divided into two groups and asked to make a series of bets. For each bet, they were offered a low-risk / low-reward option (say, a hundred-per-cent chance of winning fifteen cents) and a high-risk / high-reward option (a ten-per-cent chance of winning a dollar-fifty). Before the exercise began, the two groups were told different stories (once again, fictitious) about how previous participants had fared. The first group was informed that the spread in winnings between the most and the least successful players was only a few cents, the second that the gap was a lot wider. Those in the second group went on to place much chancier bets than those in the first. The experiment, Payne contends, “provided the first evidence that inequality itself can cause risky behavior.”

People’s attitude toward race, too, he argues, is linked to the experience of deprivation. Here Payne cites work done by psychologists at N.Y.U., who offered subjects ten dollars with which to play an online game. Some of the subjects were told that, had they been more fortunate, they would have received a hundred dollars. The subjects, all white, were then shown pairs of faces and asked which looked “most black.” All the images were composites that had been manipulated in various ways. Subjects in the “unfortunate” group, on average, chose images that were darker than those the control group picked. “Feeling disadvantaged magnified their perception of racial differences,” Payne writes.

“The Broken Ladder” is full of studies like this. Some are more convincing than others, and, not infrequently, Payne’s inferences seem to run ahead of the data. But the wealth of evidence that he amasses is compelling. People who are made to feel deprived see themselves as less competent. They are more susceptible to conspiracy theories. And they are more likely to have medical problems. A study of British civil servants showed that where people ranked themselves in terms of status was a better predictor of their health than their education level or their actual income was.

All of which leads Payne to worry about where we’re headed. In terms of per-capita income, the U.S. ranks near the top among nations. But, thanks to the growing gap between the one per cent and everyone else, the subjective effect is of widespread impoverishment. “Inequality so mimics poverty in our minds that the United States of America . . . has a lot of features that better resemble a developing nation than a superpower,” he writes.

Rachel Sherman is a professor of sociology at the New School, and, like Payne, she studies inequality. But Sherman’s focus is much narrower. “Although images of the wealthy proliferate in the media, we know very little about what it is like to be wealthy in the current historical moment,” she writes in the introduction to “Uneasy Street: The Anxieties of Affluence.”
Sherman’s first discovery about the wealthy is that they don’t want to talk to her. Subjects who agree to be interviewed suddenly stop responding to her e-mails. One woman begs off, saying she’s “swamped” with her children; Sherman subsequently learns that the kids are at camp. After a lot of legwork, she manages to sit down with fifty members of the haut monde in and around Manhattan. Most have family incomes of more than five hundred thousand dollars a year, and about half have incomes of more than a million dollars a year or assets of more than eight million dollars, or both. (At least, this is what they tell Sherman; after a while, she comes to believe that they are underreporting their earnings.) Her subjects are so concerned about confidentiality that Sherman omits any details that might make them identifiable to those who have visited their brownstones or their summer places.
“I poked into bathrooms with soaking tubs or steam showers” is as far as she goes. “I conducted interviews in open kitchens, often outfitted with white Carrara marble or handmade tiles.”

A second finding Sherman makes, which perhaps follows from the first, is that the privileged prefer not to think of themselves that way. One woman, who has an apartment overlooking the Hudson, a second home in the Hamptons, and a household income of at least two million dollars a year, tells Sherman that she considers herself middle class. “I feel like, no matter what you have, somebody has about a hundred times that,” she explains. Another woman with a similar household income, mostly earned by her corporate-lawyer husband, describes her family’s situation as “fine.”
“I mean, there are all the bankers that are heads and heels, you know, way above us,” she says. A third woman, with an even higher household income—two and a half million dollars a year—objects to Sherman’s use of the word “affluent.”

“ ‘Affluent’ is relative,” the woman observes. Some friends of hers have recently flown off on vacation on a private plane. “That’s affluence,” she says.
This sort of talk dovetails neatly with Payne’s work. If affluence is in the eye of the beholder, then even the super-rich, when they compare their situation with that of the ultra-rich, can feel sorry for themselves. The woman who takes exception to the word “affluent” makes a point of placing herself at the “very, very bottom” of the one per cent. “The disparity between the bottom of the 1 percent and the top of the 1 percent is huge,” she observes.

Sherman construes things differently. Her subjects, she believes, are reluctant to categorize themselves as affluent because of what the label implies. “These New Yorkers are trying to see themselves as ‘good people,’ ” she writes. “Good people work hard. They live prudently, within their means. . . . They don’t brag or show off.” At another point, she observes that she was “surprised” at how often her subjects expressed conflicted emotions about spending. “Over time, I came to see that these were often moral conflicts about having privilege in general.”

Whatever its source—envy or ethics—the discomfort that Sherman documents matches the results of the University of California study. Inequity is, apparently, asymmetrical. For all the distress it causes those on the bottom, it brings relatively little joy to those at the top.

As any parent knows, children watch carefully when goodies are divvied up. A few years ago, a team of psychologists set out to study how kids too young to wield the word “unfair” would respond to unfairness. They recruited a bunch of preschoolers and grouped them in pairs. The children were offered some blocks to play with and then, after a while, were asked to put them away. As a reward for tidying up, the kids were given stickers. No matter how much each child had contributed to the cleanup effort, one received four stickers and the other two. According to the Centers for Disease Control and Prevention, children shouldn’t be expected to grasp the idea of counting before the age of four. But even three-year-olds seemed to understand when they’d been screwed. Most of the two-sticker recipients looked enviously at the holdings of their partners. Some said they wanted more. A number of the four-sticker recipients also seemed dismayed by the distribution, or perhaps by their partners’ protests, and handed over some of their winnings. “We can . . . be confident that these actions were guided by an understanding of equality, because in all cases they offered one and only one sticker, which made the outcomes equal,” the researchers reported. The results, they concluded, show that “the emotional response to unfairness emerges very early.”
If this emotional response is experienced by toddlers, it suggests that it may be hardwired—a product of evolution rather than of culture. Scientists at the Yerkes National Primate Research Center, outside Atlanta, work with brown capuchin monkeys, which are native to South America. The scientists trained the monkeys to exchange a token for a slice of cucumber. Then they paired the monkeys up, and offered one a better reward—a grape. The monkeys that continued to get cucumbers, which earlier they’d munched on cheerfully, were incensed. Some stopped handing over their tokens. Others refused to take the cucumbers or, in a few cases, threw the slices back at the researchers. Like humans, capuchin monkeys, the researchers wrote, “seem to measure reward in relative terms.”

Preschoolers, brown capuchin monkeys, California state workers, college students recruited for psychological experiments—everyone, it seems, resents inequity. This is true even though what counts as being disadvantaged varies from place to place and from year to year. As Payne points out, Thomas Jefferson, living at Monticello without hot water or overhead lighting, would, by the standards of contemporary America, be considered “poorer than the poor.” No doubt inequity, which, by many accounts, is a precondition for civilization, has been a driving force behind the kinds of innovations that have made indoor plumbing and electricity, not to mention refrigeration, central heating, and Wi-Fi, come, in the intervening centuries, to seem necessities in the U.S.

Still, there are choices to be made. The tax bill recently approved by Congress directs, in ways both big and small, even more gains to the country’s plutocrats. Supporters insist that the measure will generate so much prosperity that the poor and the middle class will also end up benefitting. But even if this proves true—and all evidence suggests that it will not—the measure doesn’t address the real problem. It’s not greater wealth but greater equity that will make us all feel richer.

By Elizabeth Kolbert
This article appears in the print edition of The New Yorker on January 15, 2018, with the headline “Feeling Low.”